A Company Called 'Dropbox' Is Taking Over The World

BEFORE Apple launched iCloud in 2011, Steve Jobs allegedly offered to buy Dropbox, a file-sharing service founded in
2007, for $800m. When Dropbox declined, Apple's late boss
disparaged it as a feature, not a company. Soon after, Dropbox
raised $250m, putting its value at over $4 billion.

In December Dropbox concluded a promotional campaign that, in
just a few weeks, added 2m new users, bringing the total to over
100m, roughly double the number when Jobs made his comment.
Consumers, it seems, can't get enough of the feature.

Dropbox dominates online file-sharing. It boast three times as
many users as its closest direct rival, YouSendIt. (Its dominance is even more
pronounced when it comes to the volume of data stored.) It eats
up 20% of all bandwidth consumed globally by browser-based
file-sharing services, against 1% for YouSendIt. Dropbox users
save more than 1 billion files every day.

Most of them use the free version of the service. The company
makes makes money by charging for extra storage. Around 4% of
users plump for the premium version, though the proportion is
growing, according to Arash Ferdowsi, one of the Dropbox's
co-founders. The recent campaign, called Space Race, gave away
free space to university students in return for getting their
peers to sign up to the service. The hope is that when access to
this extra storage runs out after two years, the students, by
then freshly-minted professionals, will pay to keep using it.

Dropbox relies on individuals and small firms, for whom its
rudimentary security features are good enough; bigger businesses
with sensitive information prefer more secure services like
Box.net. The advent of competitors in the
nebulous form of iCloud, Google’s Drive and Microsoft’s Skydrive,
which come pre-installed on their respective makers' gadgets,
does not seem to have dampened enthusiasm for Dropbox. Unlike
iCloud, which boasted 190m users by October thanks to its deep
integration with Apple's mobile devices, the service is "platform
neutral"—ie, works across different devices and operating
systems—and allows easy file-sharing, both useful traits in an
increasingly connected world where few people hew devoutly to a
single device-maker.

Google and Microsoft clouds emulate Dropbox in these
respects. But at a little over 10m users each, they do not yet
benefit from from the incumbent's powerful network effect. If you
are sharing files with a dozen other people on Dropbox, a move to
Google or Microsoft would require all 12 to move with you.

Dropbox is also striving to make itself the default choice for
smartphone users. In 2011 it struck a deal with HTC, a Taiwanese phonemaker, to preinstall
Dropbox on its Android devices. In return it gives HTC users
5GB of space for free. HTC has been struggling of
late, but Mr Ferdowsi says that his company is in talks with
other manufacturers, hoping for similar arrangements.

A bigger long-term worry is the plummeting price of digital
storage. With its vast scale, Amazon has driven down costs
substantially for the likes of Dropbox, which leases server space
from the e-commerce giant. But Google Drive already offers 100GB
for $5 a month, half what Dropbox charges for the same amount of
storage. And Google can advertise its cloud across its myriad
online offerings. Dropbox's margins are only likely to get
wispier in the future.